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ABSTRACT. This paper presents the analysis from a study into the key lessons
learned from e-procurement implementation across a range of UK public sector
organisations. The literature relating to e-procurement implementation and
operation is reviewed, identifying five main themes addressed by the current
literature: impact on cost efficiency; the impact on the form and nature of
supplier transaction; e-procurement system implementation; broader IT
infrastructure issues; and the behavioural and relational impact of e-
procurement. The research carried out was intended to explore the perceptions
and reflections of both ‘early’ and ‘late’ adopters of e-procurement. Seven key
lessons are drawn from the study and presented here. We conclude by proposing
areas for further research, including the need for research into failed e-
procurement projects.
INTRODUCTION
Electronic procurement systems represent an important development
for the purchasing process (Neef, 2001), offering benefits to the
organisation through purchase process efficiency gains and price
reductions (Croom, 2000; Essig & Arnold, 2001; de Boer, Harink &
Heijboer, 2002), enhanced collaborative relationships (Holland, 1995;
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* Simon R. Croom, Ph.D., FCIPS, Executive Director of the Supply Chain
Management Institute, University of San Diego, USA and Alistair Brandon-
Jones Ph.D. candidate, Warwick Business School, University of Warwick, UK.
Dr. Croom’s teaching and research interests are in supply chain management,
e-business and capability development. Alistair Brandon-Jones’s research
interest is the impact of e-procurement implementation.
Dyer, 2000; Tang, Shee & Tang, 2001) and significant opportunity for
improving the internal service and statues of the purchasing function
(Croom, 2000; Osmonbekov, Bello & Gilliland, 2002; Stanley & Wisner,
2001; Croom & Johnston, 2003).
Probably due to the combined influence of the relative ‘newness’ of
e-procurement adoption, the perennial issue of research publication lead
times and the limited opportunities to date for longitudinal research,
much of the existing e-procurement research has concentrated on the
motivations and expectations relating to e-procurement implementation.
In this paper we set out to address the need for experience-based research
into the operational issues of e-procurement by examining not just the
implementation process, but the experiences from public sector e-
procurement operation in both local authorities and national civil
government departments. An important question that helped shape this
research was “what are the actual benefits being achieved from e-
procurement?” Our research was conceived initially as an exploratory
study and conducted over 18 months across a range of UK public sector
bodies.
This paper is structured into four sections. In the first section we
examine the current e-procurement and e-business literature in order to
review current understanding of the ‘e-procurement effect’ and to
provide a framework for defining what we call transactional structures.
The second section briefly describes our research methodology. The third
section sets out the seven key lessons from e-procurement
implementation across the UK public sector. The final section responds
to one of our key findings in order to propose some potential for future
research.
Cost Efficiencies
One of the key themes in the existing literature on e-procurement has
been concerned with the economies of information (Evans &
Wurster, 2000), in particular the realisation of cost improvements
achieved as a result of transactional and process efficiencies. These
efficiencies arise through greater opportunity for lower prices from
suppliers; from the reduction in process activity needed to complete
the total ‘requisition to payment’ process; through the increased
speed of the procurement process and better decision making as a
result of improved management information (Min & Galle, 1999;
Croom, 2000; Emiliani, 2000; Zsidisin & Ellram, 2001; de Boer,
Harink & Heijboer, 2002; Wyld, 2002). The lure of cost efficiencies
has been a major catalyst for the adoption of e-procurement (Croom,
2000) and it has been widely contended in this body of literature that
e-procurement implementation will have considerable implications
for the design of the procurement process. However, it was
contended by Lancioni, Smith and Olivia (2000) that the precise
nature of these process changes was empirically unclear.
Recently, Yen and Ng (2003) carried out a case study investigation
of electronic commerce implementation providing a useful comparison
of pre- and post- e-commerce procurement process performance. They
support the claims from prior literature that such changes deliver process
efficiencies. In addition to the three categories of efficiency improvement
mentioned above, they highlighted four additional sources of cost
benefit:
- reduction in costs arising as a result of ‘digitizing’ catalogues,
- reducing errors in order transmission,
- reductions in inventory, and
- reductions in suppliers’ marketing costs.
Consequently, improved economies of management information are
considered to be a major catalyst for reducing purchase prices through
greater transparency of market prices and lower search costs. This
observation is supported in the practitioner and general management
literature where there is a plethora of anecdotal case evidence to support
the view that electronic procurement is a far more efficient and reliable
method for the requisition to payment process than preceding manual and
semi-automated processes. (For example: Electronic Commerce News,
KEY ISSUES IN E-PROCUREMENT IMPLEMENTATION AND OPERATION 371
Public Web
Via the public web (Internet) buyers have the opportunity to identify
potential suppliers via standard search engines (such as Google.com,
Yahoo.com) or specialist trading search engines (such as kellys.co.uk).
On-line search and comparison of list prices are typically used for
specialist or low value purchases. Depending on the nature of the
supplier’s web site facility, orders may be placed on-line, via email or
through the more traditional route of telephone, fax or mail.
Exchange
The term ‘exchange’ here refers to trading sites such as the ebay
B2C e-commerce auction site and the B2B auction service provider Free
Markets and Synerdeal. These sites allow buyers or sellers to bid for
contracts – which in eBay’s case simply involves bidding for products
offered for sale by private as well as commercial sellers, whilst B2B
exchanges provide reverse auction facilities. On-line reverse auctions
KEY ISSUES IN E-PROCUREMENT IMPLEMENTATION AND OPERATION 373
FIGURE1
Classifying E-Procurement Transaction Structures
Exchange Market
Venue
Seller
Marketplace
A marketplace is in essence a multi-supplier/multi-products
catalogue often hosted and maintained by a third party providing access
to users via Internet or LAN connection.
Company Hub
Often also called a ‘buy-side’ solution, a company hub is similar to a
marketplace since the buyer (rather than a third party) hosts and
maintains a multi-supplier/multi-product catalogue.
374 CROOM & BRANDON-JONES
Extranet
An extranet is a secure, often security protected, Internet link
between buyer and seller. Such extranets are used primarily for shared
and collaborative data – such as delivery scheduling and product design
data. Pre-Internet, EDI (electronic data interchange) links represent a
type of extranet connection, being dedicated to an individual customer.
Although there remain concerns for the security of transmission over the
World Wide Web, extranets represents an effective means of
communication between close trading partners.
System Implementation
There have been few detailed empirical studies of e-procurement
implementation in the public sector; although in the U.S. Mc Manus
(2002) identified expectations of cost and process efficiencies as the
primary motivation for public sector implementation. However, she
observed that as experience with e-procurement systems has grown, so
has considerable debate about some of the fundamental principles behind
public sector procurement, including ‘lowest bid wins.’ In a second,
case-based study of Taiwanese military procurement (Liao, Cheng, Liao
& Chen, 2003) the main challenges for e-procurement implementation
were found to be the cultural resistance to changes in established
procurement processes and practices.
Heijboer (2003) has proposed a framework for the operational
implementation or ‘roll-out’ of e-procurement across the supply base. In
his paper, he proposed an analytical model based on the ROI and
payback resulting from the e-procurement rollout on a commodity-by-
commodity basis. His model proposes that organisations should
determine their rollout of e-procurement by aiming for ‘quick wins’ (or
‘harvesting the low hanging fruit’).
IT Infrastructure
Issues concerning information systems development and adoption
are central to the e-procurement issue. Rajkumar (2001) identified
systems integration as a critical success factor for e-procurement
implementation, both with the customer’s information infrastructure and
in its links to suppliers. In an earlier study, Croom (2001b) surveyed the
adoption pattern of IOS. Table 1 sets out the frequency of adoption of the
KEY ISSUES IN E-PROCUREMENT IMPLEMENTATION AND OPERATION 375
TABLE 1
Incidence of E-Procurement System Adoption
used as the mechanism for identifying the key successes and barriers in
each project examined.
All interviews were taped and transcribed verbatim. Coding of all
interviews was undertaken by both researchers independently and then
cross-compared for final coding.
Across our responding sample, experience of electronic procurement
varied. At one extreme, the two Agency bodies had both developed their
own e-procurement systems and had over ten year’s active involvement
with e-procurement. At the other extreme, three bodies had less than
twelve month’s active operational experience. Of the remaining 10
participating bodies, the modal length of experience was 3 years. (It
should be noted that the UK public sector is further supported by a
central government department, the Office of Government Commerce –
OGC - established to support and direct e-procurement and procurement
system developments across the whole of civil government in England
and Wales. The OGC provides a significant resource in terms of
development projects, research knowledge and expertise accessible by all
of the respondents).
In the next section of the paper we present the key findings relating
to the experiences of our sample respondents from their involvement
with e-procurement implementation.
FINDINGS
Our analysis identified seven key issues arising from the experiences
of e-procurement implementation:
evidence that the approach adopted was related to the length of time the
respondent organisation had been involved with e-procurement. The
underpinning logic was primarily related to the overall strategy of the
adopter, but the following statements do illustrate the contrasting logic
employed:
“..we decided to focus our efforts on the high volume, low value
purchases in order to concentrate on achieving the process
savings, since that was the basis on which our implementation
proposal was made.”
“..we needed to demonstrate that we could take control over
purchasing and supply, so we were adamant that we should roll
this out to all of our suppliers…which involved making e-
capability a mandatory requirement for all suppliers.”
TABLE 2
E-Procurement and Finance System Characteristics
Department System Finance/ERP Punchout Link to Suppliers
Process
Infrastructure 1 Oracle 11I Oracle Integrated Email, fax, mail
Treasury 1 Proprietary In progress EDI. Moving to
web-enabled
Security 1 Proprietary In progress EDI
Security 2 SAP/ SAP EBP Payment via BACS EDI with 6 suppliers
Infrastructure 2 SAP R/3/ SAP SAP Integrated Email, fax, mail
EBP v2.0c
Infrastructure 3 Not confirmed Only for Logistics Email, fax, mail
operations: electronic
payment.
Agency 1 Proprietary Email, fax, mail
Agency 2 Proprietary Via Procurement Card Email, fax, mail
& XML
Treasury 2 Oracle 11I Oracle Integrated Email, fax, mail
CONCLUSIONS
In our review of the literature we identified seven issues relating to
experiences from e-procurement adoption. In issues 1 and 2, significant
motivation for e-procurement adoption was considered to be the
economic benefits. The possibility of lower prices arising through greater
informational economies from the use of e-procurement was discussed
by many, including Malone, Yates and Benjamin (1989); Evans and
Wurster (2000) and Croom (2000). In our study we found that an
important mechanism for realising lower prices was through
encouragement for users to comply with existing contracts. Principally
this allowed purchasers to provide a more accurate forecast of contract
volume requirements to their suppliers, with the concomitant price
benefits arising from economies of volume. However, in terms of process
cost reductions, these were far more difficult to identify. Only one of the
respondents had validated process cost savings at the time of the study
and this supported the claims in the literature of a saving of
approximately two-thirds on process costs (Croom, 2000).
In issues 3 and 4 we detailed the rollout experiences. This aspect of
e-procurement has been examined by Heijboer (2003) who
recommended a commodity-based strategy. However, our study
respondents adopted a mixed commodity/supplier rollout strategy. Such
a strategy recognised the importance of establishing the purchaser-
supplier connectivity and communications in any rollout programme.
This supplier-oriented approach was further emphasised when
examination of supply base rollout identified some concerns for
integrating low value suppliers in their e-procurement programme.
Issues 5 and 6, concerning system selection and integration (as
illustrated in Table 2), was dominated by e-procurement/finance system
integration issues. The ability to ‘punch out’ procurement order data into
financial control systems is regarded as a critical requirement for the
success of an e-procurement system and thus close integration with
finance systems was identified as an important criteria.
Finally, in issue 7 we examined organisational commitment and
support required for e-procurement. One of the key characteristics in
achieving organisational support was found to be the structure of the
implementation project team – we distinguished between the inclusive,
‘open’ project team protocol and a more narrow ‘closed’ protocol, to use
Clark and Fujimoto’s (1991) terminology. An inclusive project team
KEY ISSUES IN E-PROCUREMENT IMPLEMENTATION AND OPERATION 383
FUTURE RESEARCH
Our research into e-procurement is ongoing. The study reported has
to date attempted to explore the main characteristics of e-procurement
adoption and the implementation process. Further research is now being
carried out in the UK public sector into user compliance and e-
procurement performance in order to validate the prognoses of early
commentators. We still feel that e-procurement represents an opportunity
for ‘revolution’ in procurement, but e-procurement per se does not carry
a ‘cast iron, copper bottomed’ guarantee of success. In order to enrich the
debate, we feel that one avenue for future research should be to
investigate e-procurement failures as a way of furthering our
understanding of critical factors for e-procurement performance. A
second opportunity for research is to develop means for classification of
the different forms of e-procurement, allowing for greater analytical
comparisons between alternative form of electronic purchasing and
supply.
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